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UK Unemployment Remains Steady, Average Incomes Rise

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Two weeks ago the Bank of England’s (BoE) Monetary Policy Committee voted to leave the UK base interest rate unchanged at 0.50%. The minutes of that meeting have just been published. As anticipated the final vote on interest rates was a unanimous one in favour of maintaining the status quo.

Additionally, the National Statistics Office has just published Britain’s latest unemployment figures. January’s unemployment number is stable at 7.2% the previous months figure had also been 7.2%. Today’s figure was in line with consensus estimates which were for the number to remain at 7.2%.

Not only is the unemployment rate gradually improving but incomes are at the same time rising. Average Earnings data just released for January shows that incomes, excluding bonuses, rose by 1.3% compared to the prior reading of 1.2%.

The BoE had been expected to begin a cycle of interest rate hikes as soon as Q4 this year. It is however starting to look like monetary tightening in the UK may be put off until early to mid 2015. Recently the Bank has made efforts to distance itself from comments last year which suggested that rate hikes would begin once unemployment fell below 7%.

The Bank of England tends to be quite hawkish with respect to inflation, a slight down tick in the Consumer Price Index last month provides some additional space for the Bank to hold off on monetary tightening for the foreseeable future.

Today is also Budget Day in the UK. Later this morning (12:30 GMT), Britain’s Chancellor of the Exchequer, George Osbourne, will begin outlining his 2014 budget to the House of Commons. There tends to be little in the way of surprises in these budgets, which are well leaked in advance. No changes to Britain’s tax rates are expected today and an increase in the basic income tax allowance appears to be the only fiscally expansionary aspect to this largely neutral budget.

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